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7-Cent Biscuits Are Too Pricey for Indian Workers

4 hours 25 minutes ago
(Bloomberg Opinion) -- When snack makers start to lament that Indians can’t afford to spend 5 rupees (7 cents) on biscuits,(1)it’s time to stop arguing over how much of the nation’s slowdown is cyclical and what part is structural.Considering its glaring income, wealth and consumption inequalities, India is a surprisingly calm society. However, when purchasing power dries up to the extent that rural laborers and urban blue-collar workers have to think twice about cheap munchies, then the situation is desperate. The culprit is deep-rooted wage suppression, a long-term issue that needs attention.Britannia Industries Ltd., the No. 1 Indian biscuit maker, recently sounded alarm bells over the sharp deceleration in its domestic sales volumes. Rival Parle Products Pvt. chimed in and said jobs were at risk for as many as 10,000 of its workers.A Parle executive blamed India’s 2017 goods and services tax, or GST. While the consumption tax may indeed have been an additional burden in an economy slowing under a disastrous November 2016 currency ban, the funk has its roots in insufficient wages. In recent years, only about a third of the economy’s income has gone to labor, with providers of debt and equity capital taking the rest, according to India Ratings and Research Pvt., a unit of Fitch Ratings. Raising that 33.2% labor share to the developing-country average of 37.4% would put an extra $100 billion of annual spending power in the hands of Indian households.Only then can India start facing up to the tougher challenge of reaching advanced-economy levels. It has a long way to go. The labor share of income in the U.S. was almost 57% in 2016, even after a near 10-percentage-point drop following World War II that was caused by technological changes and globalization, according to McKinsey & Co.Trouble is, the distribution of the Indian economic pie is more lopsided than the aggregate numbers suggest. As India Ratings’ analysis shows, 80% of the output generated in informal production gets used up in paying for capital, which is scarce; households get only 20% in exchange for toiling on farms and in cottage industries. At the same time, only 32% of the production of a bloated public sector is shared with the taxpayers and banks that provide the capital; as much as 68% goes to a privileged group of state and quasi-state workers who enjoy assured jobs and higher pay than they would in the private sector.The long-overdue privatization of inefficient behemoths like Air India Ltd. would reduce the wastage of capital in the public sector. But it won’t automatically help informal private businesses grow and become productive. In its first term, the government of Prime Minister Narendra Modi thought taxation would provide the required nudge. It set out to formalize entire supply chains by bringing even small firms under the ambit of the GST. The poorly designed, badly implemented plan backfired. Two years later, New Delhi is furious that it can’t meet revenue targets; its frustration is leading to an antagonistic stance toward firms. Meanwhile, industries from autos to biscuits are demanding lower GST rates. There’s no fiscal room to please all. The government hit the brakes on its own investments in the June quarter, amid an extended slump in private capital expenditure.Taxes aren't the solution. Easier hiring-and-firing norms – and not mere consolidation of archaic labor laws – will boost employment in more productive large firms that can pay better. If Amazon.com Inc. can build its largest global center in India, why should factories be afraid to scale up by hiring blue-collar workers? At the other end of the spectrum, small firms need finance.A yearlong liquidity crunch in the shadow banking industry has  caused jitters in India’s market for loans-against-property, which is how midsize businesses finance themselves. But even the luxury of a $25,000 loan obtained by mortgaging property worth $350,000 isn’t for everyone, as Pratibha Chhabra, a financial inclusion specialist at the World Bank, notes. Most small firms only have inventory and invoices to pledge, and no lender wants to be left holding half-made chairs, or potatoes rotting in a warehouse.However, if a bank lending to a furniture maker or a potato farmer in India can get repaid directly by Ikea or PepisCo Inc. against certified invoices, it can share the benefit of the final customer’s creditworthiness with the borrowers. This is how Citigroup Inc. greases the global supply chain of 700 multinationals and their 70,000 vendors. Since most tiny businesses run on household labor, only statisticians will worry about whether wages or profits are getting the lift. Spending power in the economy will rise.Such financing is well established in developed markets, though in India “to efficiently finance small firms by locating them in larger supply chains will be the next frontier,” says Gaurav Arora, head of Asia Pacific at Greenwich Associates LLC.India is overdependent on Bangladesh’s model of microfinance, which uses group pressure and social shame to collect on exorbitantly priced – but collateral-free – small loans. The country is barking up the wrong tree. A woman doing embroidery on a sari will never get more than a fraction of what her craft will ultimately sell for. But she can be given access to cheap credit. Then, she’ll also be able to buy more biscuits for her children. (1) Cookies, to Americans.To contact the author of this story: Andy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

Trump’s Trade War Could be Fueling Amazon Fires

4 hours 25 minutes ago
(Bloomberg Opinion) -- The fires currently consuming Brazil’s Amazon rainforest seem a world away from the tense diplomacy in the U.S. trade war with China. In truth, they’re more closely connected than you might suspect.One of Beijing’s main acts of retaliation in the fight has been to freeze purchases of the 30 million metric tons to 40 million tons of American soybeans it imports each year. That’s left it more dependent than ever on Brazilian soy to take up the slack. Chinese imports from Brazil in the 12 months through April came to 71 million tons, about as much as it imported from the entire world in 2014. As we’ve written, that’s driving an investment boom into Brazil’s farm sector, with major agribusiness players such as Nutrien Ltd. and Mosaic Co. shifting their focus to South America to take advantage of Beijing's desire to diversify away from dependence on U.S. food supplies. In a sense, this shouldn’t have a direct impact on the Amazon. Most Brazilian soy is grown in the cerrado, a vast area of savannah to the south and east of the rainforest. Agricultural investment has concentrated on converting cerrado land currently used for pasturing livestock into row-crops like soybeans.  That process should be able to result in a huge expansion of arable land without touching the Amazon. The trouble is, even Brazil has a finite amount of land and if you squeeze the balloon in one place, it risks popping out in another. As it is, most of the expansion of Brazil’s arable land over the past decade appears to have come at the expense of regrowth forest, which tends to be less well-protected than primary forest like the Amazon. This year’s fires could see ranchers driven out of the cerrado by arable crops to seek new pastures in freshly-cleared former rainforest in the Amazon.That’s particularly dispiriting because preservation campaigns appear to have started paying off in recent years, with clearing of Brazil’s primary rainforest almost brought to a halt over the past decade despite the ongoing felling of regrowth woodlands. President Jair Bolsonaro has already promised a more aggressive approach to developing the Amazon, scorning environmental concerns and jokingly referring to himself as “Captain Chainsaw.” Even when activity is kept away from the Amazon, land conversion has a damaging effect on the atmosphere. Brazil’s cerrado pastureland can be quite densely forested, with livestock grazing beneath the open canopy of the trees. Converting that to row crops necessitates uprooting those carbon-sequestering trunks, one reason it’s such a costly and difficult process. In addition, pastureland trampled by livestock is quite effective at locking atmospheric carbon up in the soil, but arable fields tilled every year fail to make as much difference.It’s still hard to tell exactly who is responsible for the 84% increase in fires in Brazil’s forests over the past year. The intensity of the infernos is likely the result of drought, although the rising number of blazes almost certainly comes from an increase in deliberate human activity. More than half of outbreaks have been in the Amazon, with another 30% in the cerrado and most of the rest in the coastal Atlantic forest.The danger of the current situation is that China’s hunger for soy may derail the halting recent progress in ending deforestation. The European Union in June concluded a trade agreement with the South American Mercosur bloc after two decades of negotiation, but Bolsonaro’s insouciant attitude to the Amazon represents a stumbling bloc for European governments who are needed to ratify the deal. Brazil’s agribusiness sector has even lobbied Bolsonaro’s government to take greater steps to halt deforestation, out of fear that his confrontational stance could jeopardize the EU-Mercosur deal and hurt their exports.China, on the other hand, tends to be a much more hands-off trading partner, and long-standing concerns about food security mean Beijing has been unusually solicitous of Brazil’s approval. If anything could nudge Bolsonaro toward ignoring his country’s land barons and following his instincts instead, it’s the prospect of a rich alternative source of foreign exchange from China.This would be a miserable and unexpected outcome from the current trade war. Despite coming to office on a pledge to revive the coal industry and tear up environmental rules, President Donald Trump has mostly failed to reverse the greening of America’s power sector and the auto industry’s drive toward lower tailpipe emissions.His trade fight with an equally carbon-addicted China, however, encouraged that country to embark on a ruinously carbon-intensive industrial stimulus last year, and may now be driving Brazil to uproot more of its forests. The grimmest climate legacy of the Trump administration may well come not from energy policy, but from trade.To contact the author of this story: David Fickling at dfickling@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

AmazonFresh rolls out delivery service in Phoenix

8 hours 25 minutes ago
AmazonFresh, the retail giant's grocery delivery service, is now available in Phoenix. Amazon.com Inc. (Nasdaq: AMZN) customers who subscribe to its Prime service now can add AmazonFresh to their subscription. Seattle-based Amazon expanded Fresh to Phoenix, as well as Houston and Minneapolis in the past week.

Bulls And Bears Of The Week: Chevron, Disney, Target And More

9 hours 20 minutes ago
Benzinga has examined the prospects for many investor favorite stocks over the past week. It was another tough week for the markets, with the Dow Jones industrials and the S&P 500 dropping 2% or so and the Nasdaq more than 3% lower when all was said and done. The trade war with China ratcheted up again and commentary from Federal Reserve Chair Jerome Powell did not please the president (who apparently still wants to buy Greenland).

Amazon Joins Walmart in Saying Tesla Solar Panel Caught Fire

10 hours 14 minutes ago
(Bloomberg) -- Walmart Inc. isn’t the only corporation that has seen its Tesla Inc. solar panels catch fire.On Friday, Amazon.com Inc. said a June 2018 blaze on the roof of one of its warehouses in Redlands, California, involved a solar panel system that Tesla’s SolarCity division had installed. The Seattle-based retail giant said by email that it has since taken steps to protect its facilities and has no plans to install more Tesla systems.Tesla also said in a statement it worked with Amazon following the “isolated event” last year that occurred in an inverter at one of the sites. “Tesla worked collaboratively with Amazon to root cause the event and remediate,” it said. “We also performed inspections at the other sites, which confirmed the integrity of the systems,” adding that all 11 Amazon sites are generating energy and are monitored and maintained.News of the Amazon fire comes just three days after Walmart dropped a bombshell lawsuit against Tesla, accusing it of shoddy panel installations that led to fires at more than a half-dozen stores. The claims threaten to further erode Tesla’s solar business at a time when the company is fighting to gain back market share.Walmart and Tesla issued a joint statement late Thursday, saying they were in discussions to resolve their issues. “Both companies want each and every system to operate reliably, efficiently, and safely,” they said. Tesla fell 0.8% in after-hours trading on Friday to $209.75.In the complaint filed Tuesday, Walmart said it had leased or licensed roof space at more than 240 stores to Tesla’s energy unit. Two of the Walmart fires occurred in May 2018. Amazon said it has a very small number of solar systems installed by Tesla.More widely known for its electric cars, Tesla bought panel installer SolarCity three years ago in a $2 billion deal that proved highly controversial. SolarCity’s chief executive officer at the time is the cousin of Tesla CEO Elon Musk, and Musk was the chairman of SolarCity’s board.Also this week, Business Insider reported that Tesla launched an effort to replace a faulty part used in some of its solar panel systems last year. It was unclear whether issues with the component known as a “connector” affected Walmart or Amazon installations.Tesla said in response to the Business Insider story that some connectors manufactured by Amphenol Corp. “experienced failures and disconnections at a higher rate than our standards allow.” Over the past year, the company said, less than 1% of sites with these connectors exhibited abnormal behavior.Amphenol did not respond to a request for comment.(Updates with Tesla’s response in third and fourth paragraphs.)\--With assistance from Brian Eckhouse.To contact the reporters on this story: Dana Hull in San Francisco at dhull12@bloomberg.net;Matt Day in Seattle at mday63@bloomberg.netTo contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Kara WetzelFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

The U.S. can slash health-care costs 75% with 2 fundamental changes — and without ‘Medicare for All’

10 hours 24 minutes ago
As the Democratic presidential candidates argue about “Medicare for All” versus a “public option,” two simple policy changes could slash U.S. health-care costs by 75% while increasing access and improving the quality of care. If they were rolled out nationally, the United States would save $2.4 trillion per year across individuals, businesses, and the government. The first policy—price tags—is a necessary prerequisite for competition and efficiency.

Torching Farmers and Ranchers Won’t Stop Fires in the Amazon

12 hours 24 minutes ago
(Bloomberg Opinion) -- The world’s biggest tropical forest is back in the headlines, for all the wrong reasons. Leonardo DiCaprio and Madonna are worried. NASA and Amnesty International are tracking the ruin. French President Emmanuel Macron vowed to make the Amazon emergency a priority during the meeting of the G-7 countries in Biarritz and threatened to block the recently signed trade pact between the European Union and South America’s Mercosur countries because of Brazil’s dereliction of duty in the Amazon.What’s mostly missing from this grim tableau are broader explanations of why destruction is rising and how to get a grip. The default has been to round up the usual rainforest suspects: Bootleg loggers, rogue ranchers, pick-and-pan gold miners. That’s partially true. “A lot of the command-and-control measures that limited forest clearing and burning development in the Amazon are weaker now,” said Daniel Nepstad, a rainforest expert and president of the Earth Innovation Institute. “And with official eyes off the Amazon, rural property owners feel empowered to move forward, clear and burn.” Yet a strategy of demonizing instead of assisting farmers and ranchers misses the bigger picture and forsakes potentially valuable allies in preserving the South American frontier.Why the Amazon Is on FireBrazilian environmental policy is a rainforest of rules and red lines. Amazon property holders must leave 80% of their land untouched. Even on the remaining 20%, deforesting without a permit is illegal. Violators pay stiff fines (around $1,200 per hectare), land in jail or do both. Obtaining environmental permits to develop rural property is a vexing, months-long process that is onerous for big landowners, let alone capital-starved smallholders.While there is every reason to treat offenders severely, saving the rainforest requires doing more. To curb deforestation, honor the ambitious pledge to slash climate-cooking greenhouse gases more than a third from 2005 levels by 2030, and comply with the green clauses of the nascent Mercosur trade deal with the European Union, Brazil should plant more carrots, not wave more sticks.That means treating farmers and, yes, cattle ranchers more as Amazon stakeholders than aspredators. Low-tech herders are some of the most formidable threshing machines in the tropics. They graze their cattle on scraggly pasture then move on when that land is spent, slashing and burning deeper into the forest. That routine is one reason the Amazon has an area twice the size of Portugal (200,000 square kilometers) of degraded or failing pasture. In many cases, penury is the driver of villainy.Research in the western Amazonian state of Acre shows that employing the right tools can curb and even reverse the destructive spiral. Herders who shift cattle around a property, protect pastures with fruit trees, and plant hardier forage that shields the ground from the withering sun and traps soil-nourishing nitrogen have multiplied their herds without cutting more trees. Where most Amazonian farmers graze just one cow per hectare, Acre’s best farms now raise three or four.  Agronomist Judson Valentim, Acre station chief for the Brazilian pastoral research company Embrapa, found that adopting such techniques plus modest subsidies of just $12 per hectare can do what heavy fines and penalties cannot: encourage herders to restore their fields. Restored pastures lead to less new deforestation. Merely keeping better track of costs, say weed control or vaccinations, also leads to healthier farms: adding 17 hectares of restored field for each check-listed ranch item.There’s also a close parallel between poverty and predatory ranching. Poorer, less-educated herders, enjoying little access to credit and working farthest from city and market hubs, tend the worst farms. Even as heavy fines may scare big landholders into compliance with environmental law, they reap little but resentment and furtive forest-cutting among smallholders. It’s little wonder that small farmers and settlers in land reform projects are some of the main drivers of deforestation.Sustainable development is beautiful, but expensive. It’s much easier for rural landowners in Amazonia to obtain a license to clear their land than to secure permits for sustainable logging. Just hiring experts to carry out the forestry inventory for prospective logging on a midsized property can cost up to $50,000, Valentim said. The tangle of rules is confusing, costly and counterproductive. “Does it make sense to tie farmers in knots?” asks Nepstad. “We need ways to make them more efficient, less inclined to burn and more inclined to put out fires.”Such barriers may explain why many Brazilian farmers put so little stock in preservation, and threw their support to Bolsonaro and his blazing saddle frontier agenda. “Take the money and reforest Germany,” he quipped, after the German government, followed by Norway, froze tens of millions of dollars in conservation aid due to the surge in forest clearing. Never mind that Bolsonaro on Friday ordered the armed forces to combat Amazon fires, so confirming the emergency he so vehemently denied.Slash-and-burn diplomacy may feed the partisan hearth, but it’s reckless economics. Trade partners are increasingly reluctant to import goods from bad environmental stewards. “As an exporter, I tell you things are getting tough,” Brazil’s biggest individual soybean producer and former agriculture minister Blairo Maggi recently told the Brazilian paper Valor, taking issue with Bolsonaro’s strident rhetoric. Amazon farmers need help, not hubris.To contact the author of this story: Mac Margolis at mmargolis14@bloomberg.netTo contact the editor responsible for this story: James Gibney at jgibney5@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

Bolsonaro’s Amazon Flame Throwing Unsettles Farming Support Base

16 hours 25 minutes ago
(Bloomberg) -- As Europeans threaten to block access to Brazilian exports over President Jair Bolsonaro’s environmental policies, some of the agribusiness players loyal to the former Army captain are starting to fret about the consequences of his rhetoric.French President Emmanuel Macron issued the most explicit ultimatum yet to Brazilian commercial interests on Friday, stating that France would oppose the trade deal between the European Union and Mercosur, the South American customs union, in retaliation to Bolsonaro’s hostility to tackling climate change. While ratification of the deal is still a long way away -- and German Chancellor Angela Merkel does not share Macron’s position -- Brazilian exporters are uneasy.“You’re starting to see an expression, a movement of people who represent the sector, and it doesn’t seem like just a hypothetical threat,” Rubens Ricupero, former finance minister and former secretary-general of the U.N. Conference on Trade and Development said. “These are people who have a sensitivity to exports, not a sensitivity for the environment.”Unswerving defense of farmers in Brazil’s heartland along with a pledge to slash environmental regulations to unlock the Amazon’s productive potential helped lift Bolsonaro to the presidency. With the world’s largest rainforest ablaze, prominent representatives of the sector are sounding the alarm, saying farmers’ hard-won reputation for sustainability is in jeopardy and, in turn, their exports to conscientious consumers. Among lower-house lawmakers from the farm caucus surveyed by Ibope this month, 80% think illegal deforestation is already hurting Brazil’s image and business.Finland, which currently holds the presidency of the EU, even raised the idea of banning Brazilian meat imports on Friday in response to Bolsonaro’s lax stewardship of the Amazon.The European Union ranks second only to China as the final destination of Brazil’s agriculture exports, and accounted for 16% of the shipments in 2018. Brazil exported $13.6 billion in agricultural products to the region last year.Speaking OutRoberto Brant, the agriculture confederation’s president and a former lawmaker, called on producers to loudly counter Bolsonaro’s damaging statements. And Senator Katia Abreu, a former agriculture minister, said she’s very afraid Brazil will lose European markets. “Farmers are being deceived,” she told Estado de S. Paulo. “They may be happy today, and they will be crying tomorrow.”Soybean traders signed the Brazilian Soy Moratorium in 2006, pledging not to buy soybeans from deforested areas. But some exporters believe Bolsonaro’s decision to blame NGOs for the fires in the rainforest may lead importers to require certifications to import Brazil’s soy products if the situation over the Amazon deteriorates, according to an industry representative speaking on condition of anonymity. Some buyers may prefer purchasing soy-meal from rivals Argentina and U.S, the person added.On Thursday night, the soybean processors group Abiove said in a statement it’s “cautiously following” recent statements on preserving the Amazon. It also reiterated its commitment to the environmental agenda, adding that its companies don’t acquire or finance soy from farms where deforestation has been detected.One meat executive said in an interview that, while agribusiness may be disappointed by Bolsonaro’s attacks on Macron and joking demands that Merkel should “reforest Germany”, producers are happy with his policies and the European Union doesn’t need deforestation as an excuse if it wants to cut imports.Other producers mimic Bolsonaro’s defiance in the face of foreign consternation, as well as his disdain for environmental NGOs.“Bolsonaro’s comments are only controversial for people who don’t know Brazil,” Bartolomeu Braz Pereira, head of soybean farmers group Aprosoja, said in an interview. “Bolsonaro is pulling back the curtains and presenting Brazil how it really is. We had international NGOs imposing the rules, and that isn’t right. After deforesting their lands, they want to tell us how we should protect ours?”Fire StartersSmall-scale producers are feeling emboldened to set fires to recover their fields, less because of Bolsonaro’s bluster than because regulators were completely debilitated in recent years during Brazil’s fiscal crisis, according to Moises Fernandes, an agronomist and environmental consultant in the Amazon state of Rondonia. The fact Bolsonaro keeps speaking out, however, means blame is fully ascribed to him.“As he’s head of state, logically when he talks any country that already wants to apply commercial sanctions to Brazil can cite that as a factor,” said Fernandes, who voted for Bolsonaro. “The truth is he talks too much: saying you can save the environment by pooping every other day, ordering Angela Merkel to plant trees. Why? Why is he wearing himself out?”\--With assistance from Simone Iglesias.To contact the reporters on this story: David Biller in Rio de Janeiro at dbiller1@bloomberg.net;Tatiana Freitas in São Paulo at tfreitas4@bloomberg.net;Fabiana Batista in Sao Paulo at fbatista6@bloomberg.netTo contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Bruce Douglas, James AttwoodFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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